Eight Supertrends Shaping the Future of Business

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1 PHOTOS.COM Success in the business world of tomorrow means recognizing the sweeping changes of today. By Karl Albrecht Eight Supertrends Shaping the Future of Business After reviewing many trends occurring in the global marketplace, My associates and I at Karl Albrecht International have summarized the most important trends in terms of eight overarching developments that are altering the face and dynamics of commerce. Although the selection is subjective in nature, and possibly open to some discussion or even debate, these eight supertrends are intended to help managers, entrepreneurs, and investors contextualize the fast-moving changes taking place around them. We ve also included examples of these trends at work. One of the key handicaps inherent in the study of the generic future is the lack of clear sense of time span and a fuzzy conception of the sequence of developments that will presumably get us to the future that is forecast in a futurist s scenario. In business, long-range planning was once a hallowed concept; one should think in terms of decades at least. Japanese companies were credited with thinking on a scale of 100 years or more. In recent times, businesses have been thinking much more tactically and immediately. While a planning horizon of 10, 20, or 30 years invites some inspired and creative strategic conceptualization, the simple fact is that most executives focus their attention and resources on time spans that are considerably shorter. In presenting these supertrends, I hope to paint a moving picture, if you will, of where business is and where it s going in the next five to 10 years. 1. Customer Supertrend: The Microsegmentation of the Marketplace Monolithic markets, customer segments, and product categories are continually breaking up into smaller clusters of demand and preference. Customers are becoming ever more differentiated in their lifestyles and interests, with smaller and more specialized groups responding to more narrowly targeted commercial messages. First articulated by Alvin Toffler in his landmark book Future Shock (1970), demassification is the disintegration of mass communication, mass values, mass behavior, and mass preference. As a result, the cultures in the developed world are becoming ever more heterogeneous. Human communities are no longer limited to specific neighborhoods, classes, ethnicities, or locations; the emergence of Web-based virtual neighborhoods is rapidly changing our definitions of community and fellowship. Diversity in lifestyles, values, and priorities is becoming more apparent with demographic changes. People of varying ages now feel the freedom to exhibit attitudes and lifestyles outside of those traditionally associated with their age group. Demassification and microsegmentation are making it more difficult and costly to reach specific groups of customers based on their unique values and needs. Broad appeals won t work. Enterprises of all kinds are therefore finding it necessary to develop more focused value 2006 World Future Society 7910 Woodmont Avenue, Suite 450, Bethesda, MD 20814, U.S.A. All rights reserved. THE FUTURIST September-October

2 packages to reach these smaller groups of customers sharing more specialized clusters of preference. An example of this microsegmentation can be seen in the rapid rise of blogs or online personal diaries and news columns. Internet news sites are also gaining popularity, illustrating how small-scale media outlets are getting the scoop on national TV networks and newspapers that provide more generic content. STR / AFP / NEWSCOM 2. Competitor Supertrend: Value Targeting Value targeting, simply put, means aiming for whatever matters most to individual consumers. Enterprises that have traditionally offered a broad range of products or services are now facing specialized competitors who provide more specific, targeted solutions, often in new ways and at lower prices. The customary one size fits all packages are losing their appeal as customers increasingly cherry pick the offerings, selecting preferred options a la carte. The reciprocal relationship between the Microsegmentation trend and the Value-Targeting trend means that competitors increasingly focus on a few selected areas where they can hope to achieve an advantage. Webbased sources in particular are threatening the one-stop shopping premise of enterprises that provide information and knowledge, such as educational institutions, publishers, associations, and advisory services. Customer loyalty, having always been a questionable proposition, has become less of a priority as enterprises must compete for customers on an item-by-item basis. For example, IBM perhaps the world s oldest still-operating computer manufacturer sold its personal computer division to the Chinese firm Lenovo in IBM has since put more focus on its individual service and consulting practice, providing tailored IT infrastructure services to business, often over the Internet. 3. Economic Supertrend: Chinafication The phenomenal growth of the Chinese economy is having global impacts, which are apparent even to A Lenovo sales professional examines the latest IBM computer designs at a technology fair in Beijing. Lenovo s acquisition of IBM s personal computer division in 2005 illustrates the strong growth of the Chinese economy. enterprises that have never thought of themselves as operating globally or internationally. China s rapidly growing consumer class will compete ever more intensively with First World consumers for needed resources such as oil, water, energy, grain, manufacturing raw materials, and luxury food items, including meat. Western manufacturers and consumer-product marketers will face ever more intense competitive pressures from the China-Mart axis i.e., low-cost manufactured goods from China marketed by America s retailing giant Wal-Mart, among others. China s vast pool of cheap labor may dominate world labor markets for decades, giving that country a near-permanent monopoly on cheaply manufactured goods. Chinese industrial firms and cartels (often indistinguishable from the Chinese government and the Communist party) are using accumulated foreign exchange reserves to buy up foreign firms and capital assets, seeking to secure a grip on supplies of critical resources such as oil. Chinese trade practices, competitive strategies, currency manipulation, and piracy of intellectual property are causing protectionist reactions in the developed countries, which will probably increase for some time. Economic growth in China was 9% in 2005, compared with 3.5% in the United States. China has become the world s second-largest oil consumer. The U.S. trade deficit with China was $201.6 billion in 2005, which represents a 25% jump from Chinese manufacturers currently produce more than 70% of the world s toys, 60% of its bicycles, onethird of its television sets and air conditioners, and half of the world s microwave ovens, according to The Chinese Century by Oded Shenkar (Wharton, 2005). 4. Technological Supertrend: From Information to Knowledge Information is rapidly becoming a profitless commodity, and knowledge is becoming the new competitive advantage. 26 THE FUTURIST September-October 2006

3 The inexorable reconstruction of Western societies and economies, accelerated by the pervasive impact of information technology and the rapid spread of the Internet, is requiring us to rethink Alvin Toffler s Third Wave concept the shift from industrial societies to information-based societies. Many low-level employees previously thought of as knowledge workers are now being recognized as data workers, who contribute very little added value to the processing of information. In other words, information technology is doing more of the work formerly done by humans, even in high-tech areas such as sorting data for relevance. To the extent that digital citizenship correlates with income and educational level, the socioeconomic chasm between the haves and havenots will reinforce a corresponding digital caste system, characterized by knowledge-haves and knowledgehave-nots. The Web-based scientist matchmaker InnoCentive connects corporations with freelance or even novice scientists who work on a per solution basis. According to its Web site, Inno- Centive enables companies to tap into the talents of a global scientific community for innovative solutions to tough R&D problems. This trend, which Wired magazine has dubbed crowd sourcing, is having unanticipated consequences for technical workers who long thought of their jobs as completely secure and themselves as irreplaceable. New psychopathologies, such as Internet addiction, digital depression, and connected aloneness, are underlining unfulfilled needs for social connections, particularly in the geek population and among young people. In fact, South Korea opened a Centre for Internet Addiction Prevention and Counseling after a young man collapsed and died following an 80-hour Internet gaming session. Restoring, rediscovering, or reinventing this personal-virtual balance will be an important challenge for both business and community leaders. Information-based enterprises will find themselves increasingly challenged to move beyond commoditized products and service experiences to new levels of added value and life enrichment through knowledge. Ironically, the developing state of all-pervasive connectedness imposed by Internet use, cell-phone technology, instant messages, and other wireless technologies may actually give rise to a greater appetite for meaningful personal contact. 5. Social Supertrend: Dumb and Dirty America s rapidly saturating media environment is forcing marketers of the popular culture to resort to ever more provocative methods of capturing the attention of a jaded public, creating a pervasive culture of amusement that tends to devalue and displace thoughtful discourse. Just as bad money drives out good, it can be said that dumbeddown content drives wised-up content out of circulation. The ever more desperate use of sexualized, violent, antagonistic, and voyeuristic content as an attention-getting strategy in news, advertising, publishing, and entertainment is causing more people to perceive the social values projected by the popular commercial culture as narcissistic, hedonistic, anti-intellectual, and regressive. This relentless dumbing-down of the popular channels of discourse is accentuating the differences in world view between fully conditioned media consumers and a smaller number of self-educating citizens who seek to counteract these influences in their own lives. Perhaps one indicator of pop culture s dominance over public life can be seen in voter behavior. There RCA RECORDS The top 12 contestants in the 2006 American Idol competition. A sign of cultural dumbing down? More votes were cast for the two finalists than were received by any U.S. presidential candidate in history. THE FUTURIST September-October

4 were more total votes cast on the American Idol finale in 2006 than for any single U.S. presidential candidate in history. Rise of the Wise Consumer and Investor Beyond the realm of media, advocacy groups are forming around various aspects of the restoration agenda, such as the reaffirmation of family values, opposition to the commercial exploitation of children, corporate social responsibility, ethics of elected officials, improvement in public education, and attention to environmental and social priorities. An example here may be the rise of ethical consumerism. While still a small segment of the U.S. population, an increasing number of people have grown hostile toward corporations that exploit impoverished labor or who wantonly degrade the natural environment. These consumers are willing to pay a higher premium for the same item coffee, for example if that item is produced in a manner that s consistent with their social values or sold by a vendor who seems to share their core beliefs. Defenders of traditional, exploitative business practices have argued that ethical consumers have never Buying Green Source: LOHAS, 6. Political Supertrend: CyberMobbing The emergence of Web communities, smart mobbing, and swarm advocacy are spawning temporary or transient political entities that outflank traditional channels and methods of influence. With political argument becoming much more popular in the broadcast media, and smaller and more-specialized advocacy groups forming and disintegrating over time, elected officials and public agencies are under increasing scrutiny and pressure for accountability. This peasants with pitchforks phenomenon is increasingly prevalent, as causedbased political activists can more easily assemble temporary constituencies through online marketing and fund-raising. Web-based news producers are outpacing traditional radio and TV broadcast sources, as well as print media, in getting news products and alternative points of view to the market by short cutting been a large enough group to warrant a blue-chip corporation changing its business practices. However, according to the group Lifestyles of Health and Sustainability (LOHAS), a $228.9 billion market exists for goods and services focused on health, the environment, social justice, personal development, and sustainable living. The importance of corporate responsibility is also growing among investors. In a recent survey by the LOHAS group, nearly half, 49%, of those questioned agreed that it is important for companies to not just be profitable, but to be mindful of their impact on the environment and society. Usage Growth Rates of Select Environmentally Friendly Products, Hybrid Vehicles +267% Compact Fluorescent Light Bulbs +22% Energy-Efficient Windows +18% Solar Panels +17% Organic Foods/Beverages +8% Natural Household Cleaning Products +13% the conventional weekly news cycle. The increased noise level in the various channels of political influence is making it more challenging for interest groups of all kinds to get their views considered and to attract support for their agendas. The success of political action committees and grassroots organizations that conduct operations primarily over the Internet is having a big effect on politics in the United States. A group called MoveOn.org is considered one of the largest and mosteffective online advocacy groups, and many see it as a counter to the influence of moneyed corporate lobbyists. MoveOn supports a wide array of progressive causes, such as curbing global warming, preserving Internet neutrality, and protecting minority voting rights. 7. Legal Supertrend: Knowledge Warfare Competitive struggles between knowledge-intensive enterprises are increasingly fought both on the legal battlefield and in the marketplace, as the creators, producers, publishers, distributors, and consumers of intellectual-property-based products pursue their separate interests. High-profile lawsuits and legislation have highlighted the increasing vulnerability of copyrights and other intellectual property protections. The entertainment industry in particular may be driven toward zero-profit levels and mass mediocrity as media-based products have ever shorter profitable lifetimes. The open-source software movement, currently challenging Microsoft Corporation s dominance of the PC sector with products such as Linux, may drive down software prices and profits. Piracy and theft of intellectual property, particularly in Asia, continues to threaten creators return on investment. While intellectual-property battles are typically considered the province of large corporations, the fallout and side effects from these battles can affect many smaller enterprises and individuals: When publishers lose revenue from books, they publish fewer books or go out of business. Authors can t afford to write, and good books go unpublished and unread. 28 THE FUTURIST September-October 2006

5 Intellectual property industries or core copyright industries make up 6% of U.S. GDP. ARIF ALI / AFP / NEWSCOM 8. Geophysical Supertrend: Counter- Americanism Made in America is no longer cool. Political counterreactions to an increasingly unilateral and militarized U.S. foreign policy, together with nationalistic and regionalistic coalitions, are eroding the taken-forgranted dominance of American styles, values, products, and business practices. Americans traveling abroad and employees of U.S. businesses operating in other countries must increasingly consider personal-security risks in planning their activities. Threats of violence against Americans and U.S. enterprises are significantly increasing the cost of business operations. As the United States continues to lose its unique competitive advantages in science and technology, as intellectual capital continues to develop rapidly in competing countries such as China and India, and as competition for oil and other natural resources intensifies, an American twilight of influence is increasingly likely. As more business enterprises seek to go international, localized business practices are resisting the global reach of the Americentric model. Enterprises seeking to develop globally will need to partner with local entities, develop an authentic local presence, and evolve more relevant business models. In October 2001, shortly after the U.S. invasion of Afghanistan, an angry mob in Karachi, Pakistan, set fire to a locally owned Kentucky Fried Chicken franchise. A similar event occured in Lahore, Pakistan, in February In 2003, a Ronald McDonald statue was torched in Quito, Ecuador, following the U.S. invasion of Iraq. A boycott of American goods, organized primarily through the Internet, contributed to a 55% decline of U.S. exports to Saudi Arabia between 1998 and 2002, according to the Middle East and North Africa Business Report. Nusrat Choudhury, writing for the Princeton Project on National Security, has A KFC restaurant burns in Lahore, Pakistan. The restaurant was set on fire by an angry mob during a protest in February Anti-Western, and particularly anti-american, sentiment is on the rise, warns author Karl Albrecht. speculated that the price U.S. firms may pay for rising anti-american sentiment may be directly related to the visibility of their presence. Reacting to the Trends Several key points emerge immediately from this overview of supertrends. At least half of them relate directly to the emerging Knowledge Age. It s time to stop marveling about the coming age of information and knowledge and get serious about coping with it and capitalizing on it. The most important key point to consider may also be the most obvious: These trends (by and large) represent both threat and opportunity. A pessimistic first reading might perceive many of these ongoing developments as bad news, an inventory of challenges. A more careful reading, however, could well see them as strongly implying an action agenda. Clearly, enterprises that want to avoid the slow slide into irrelevance will need to respond proactively to these findings. About the Author Karl Albrecht is the author most recently of Social Intelligence: The Science of Success (Pfeiffer, 2005) and founder of the management consulting firm Karl Albrecht International, 3120 Old Bridgeport Way, #100, San Diego, California Telephone ; mail@karlalbrecht.com; Web site FEEDBACK: Send your comments about this article to letters@wfs.org. THE FUTURIST September-October

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